Merkel preaches federalism to MEPs, warns Britain against EU exit

German Chancellor Angela Merkel made a strong federalist speech in the European Parliament yesterday (7 November) before leaving for London, where she urged Prime Minister David Cameron not to turn his back on Europe and work with her to avoid deadlock at European Union budget talks later this month.

Merkel spent the afternoon meeting MEPs, culminating in a two-hour discussion centred on the EU's economic troubles and the upcoming negotiations on the shape of the bloc's next long-term budget.

Merkel called for strengthening economic policy coordination and more joint fiscal policy.

Merkel warned MEPs that much remains to be done to get a handle on the eurozone crisis, arguing that members of the EU single currency must press reforms and draw a roadmap for unity. On several occasions, she quoted Jacques Delors, the long-serving Commission president and considered one of the “fathers of Europe”.

Ahead of a December EU summit to deal with the debt crisis, Merkel told lawmakers that countries must allow the European Union to police budgets when necessary if the bloc is to maintain prosperity.

"Much still has to be done to win back trust in the European Union as a whole," Merkel said. "We cannot stop halfway. We have to be creative: We have to find our own new solutions."

She also said policies need to become "more common," adding that a pan-EU supervisory body with the power to police banks to avoid risks must be effective. She said budgets across the EU must be determined with a one-for-all outlook.

"Trust in the EU needs to be re-won," Merkel said in her speech.

Merkel also brought up complicated treaty changes as one possible solution to the crisis. Europeans have to be "ambitious and demanding, and not shy away from a change to the contractual basis," she said.

Transferring sovereign powers over to the EU cannot be ruled out, Merkel said. She continued her lobbying for austerity measures that have restricted growth in the countries hardest hit, saying that "the effort is not in vain."

'I cannot imagine Europe without Britain’

Merkel insisted that the United Kingdom is an indispensable part of Europe hours before her scheduled meeting with Cameron.

"I believe you can be very happy on an island, but being alone in this world doesn't make you any happier," Merkel said after British politician Nigel Farage, leader of the anti-European UK Independence Party, urged her to tell Cameron that Britain should quit the EU.

Cameron, who wants to stay in the bloc under renegotiated terms, argues that the EU must tighten its belt at a time when the eurozone debt crisis looms large, and many countries are faced with austerity and shrinking household budgets.

The leaders met in London to try to iron out differences over the EU's proposed €1 trillion budget for 2014-2020 that threaten to block a deal and fuel fears that London is drifting away from the 27-nation union.

"Despite differences that we have it is very important for me that the UK and Germany work together," Merkel said before the start of her meeting with Cameron.

"We always have to do something that will stand up to public opinion back home. Not all of the expenditure that has been earmarked has been used with great efficiency ... We need to address that," she said.

“Germany has traditionally played a leading role in Europe but under your leadership this is no longer the case. Where is your commitment to a strong Europe with a clear long-term vision,” he said.

"The policies that Chancellor Merkel advocates for countries such as Greece and Portugal – and for the whole of Europe – are threatening the social cohesion of Europe. The Troikas at work in several of these countries should not be supported, as they are 'Destroykas', undermining the principles of the European social model."

European People’s Party leader Joseph Daul emphasised the need for an EU budget to energise the economy. "We are convinced that the European budget is indispensable for getting out of the crisis. We must therefore invest in Europe. So I do not quite understand the Council's position. On the one hand, it backs us in the Europe 2020 Strategy and asks us to make further commitments, but on the other hand wants to cut spending. We need a [budget] that matches our ambitions. We need investment in research and development, and in innovation, both powerful sources of growth and therefore jobs all over Europe. We must carry this logic through to its end," Daul said.

ALDE group leader Guy Verhofstadt underlined the need for action to tackle the underlying causes of the crisis and the key role of Germany in agreeing to an exit strategy.

"The German government's own economic advisory council has proposed the useful idea of a debt redemption fund that is temporary, will not require a treaty change and will reduce interest rates across the Eurozone meaning that painful austerity measures will not be in vain. At present, German taxpayers are, in effect, paying for the dividends of the bond holders of government debt."

"Europe now has no choice but to put in place a genuine economic government supported by a single European bond market that can ensure both high liquidity and low interest rates," the ALDE leader said.

Martin Callanan, leader of the European Conservatives and Reformists group, told Merkel that he had sympathy with German taxpayers. However, he also warned that removing national economic sovereignty was a recipe for social unrest, which would take too long to implement to have meaningful effect on the current crisis. He told her that Germany faces the same fundamental choices as at the start of the crisis - namely to produce the 'Big Bazooka' needed, or to allow some countries to be unshackled from an overvalued currency. He called for the currency crisis to be tackled so that the EU can focus on the real challenge of its decline in global competitiveness.

UKIP leader Nigel Farage MEP suggested she should tell Cameron: 'Look, David, this simply doesn't work anymore, it really is time for the United Kingdom to leave the European Union.

“All I am suggesting Chancellor is that we have a simple amicable divorce and we shall all get on much better in the future."

GUE/NGL President Gabi Zimmer told Angela Merkel that austerity policies should come with a danger warning. "Your policies of austerity are forcing people into poverty, into unemployment and are destroying SMEs. Austerity kills, as my group let you know today before this meeting."

Zimmer also said: "The last two measures of the Memorandum of Understanding, the suspension of employment protection for one year and the reduction of the minimum wage for workers under 25 to two-thirds of the national minimum wage, have recently been deemed as directly at odds with the European Social Charter by the Council of Europe's European Committee of Social Rights, making them illegal."